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Budget to lift low-cost homes

india Updated: Feb 21, 2013 11:50 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times
Mahua Venkatesh

The government is set to provide a fillip to the affordable housing segment in the coming budget to address a growing middle class hunger for homes.

The thrust would be on the sub Rs. 20 lakh homes, government sources said, indicating tax breaks or other incentives like easier loans that may be provided for cheaper homes.

Besides trying to address the yawning gap between the demand and supply in this category, the finance ministry is hoping that a revival in the lower end of the realty market may revive overall economic growth hit by high interest rates, inflation and sluggish demand.

"The finance ministry is trying to look at all channels to revive the growth story and housing is one of them as it would naturally help other related industries, besides filling the gap in housing," a senior finance ministry official said.


With real estate prices soaring in the metros, remote locations like Bhiwadi, Bawal and Manesar in NCR region have been identified for launching affordable housing projects.

Similarly, Ambivili and Karjat near Mumbai are turning out to be hot spots for this segment.

Real estate developers in the metros indicated that due to a rise in input costs, it would be difficult for them to reduce prices for projects within the city boundaries.

"There is a huge demand in this segment and while the focus has been on the high-end segment, the lower segment has been neglected. Now, the effort would be on providing incentives to develop this market," said the official, who refused to be identified.

The finance ministry has directed banks to be more open to give home loans to customers, especially for those seeking loans within the Rs. 20 lakh category.

The Indian Banks' Association is also chalking out ways to facilitate and ease funds to the real estate majors to enable them to complete unfinished projects.

Banks have been typically wary of lending to the real estate sector due to rising interest rates and non-performing assets (loans that fail to yield returns).

To make things easier for sturdier real estate developers, the RBI in December allowed external commercial borrowings up to $1.0 billion (Rs. 5,500 crore) for low-cost housing projects.

ECBs can make loans cheaper for Indian firms as interest rates in advanced economies are low.